Should I hire my friend or relative as my real estate agent?

Good Idea Bad Idea by Icefields
Good Idea Bad Idea by Icefields

You’re considering selling or buying a house and you have to choose a real estate agent to handle the largest financial transaction you will ever make. You’re caught in a dilemma because you have a friend in the business and you just don’t know if she’s the best person for the job. How do you decide and how will you tell her if you choose not to use her without damaging your relationship? You’ve been putting this off because you just don’t want to deal with this. So what do you do?

First and foremost interview real estate agents that are active in your area and find out what they offer. Then interview your friend, as you would any other agent, and hire the most qualified person for the job. This of course is easier said than done so let’s discuss the pros and cons of going against your better judgement (which is always a bad idea) if you’re leaning towards hiring your friend just to keep your relationship intact.

Advantage Disadvantage

Surely there are some advantages to dealing with a friend. There’s an immediate comfort level and you can contact them at all times which is a privilege not all realtors grant their clients. A true friend will have your best interest in mind and you can be certain they will go the extra mile to do their best for you. You may also be thinking "maybe I'll get a break in commission too".

These are presumed advantages as long as they are accompanied by a strong moral fibre and your friend acts accordingly in their professional lives. Remember, even if she’s a lovely person socially, she may be very different in a business context. So it’s critical you entrust this large financial transaction to someone whose business ethics you are sure of.

Now let’s look at the downside of dealing with a friend or relative. The real estate industry is highly litigious because it’s the biggest financial transaction most people make in a lifetime and many things can go wrong. Consumers sue for all kinds of reasons and most lawyers will advise you to include your real estate agent in any lawsuit whether they are a friend or not when something goes wrong.

These lawsuits can arise from allegations of misrepresentation of the condition of the home to incompetence when handling a transaction to breaches of fiduciary duty toward a client. Whether the allegations are true or not, many brokers who run real estate offices spend a great deal of time defending ethics cases or dealing with law suits filed against their agents and brokerages. So don’t think these occurrences are rare because they are not. Ask yourself “can our friendship withstand such an incident and will I have the courage to sue or complain if something goes wrong?”

Depressed businessman

Buying and selling property is stressful and tensions can be especially high during this time. Sometimes people switch their agent because it just didn’t work out. But listing or buying with someone you know socially gives you no easy way out. If things turn sour you will have to choose between a potential financial loss and a social one. While this may be an easy decision for some people, most would struggle with this dilemma.

Expert

I want to relay an incident that happened a few years ago which will drive home the importance of listing with an agent who knows the area and has experience in the particular type of home you are selling.

I appraised a house in an area I know quite well for $849,000. Three months later the home owner decided to list with her niece who is a new agent and who sells houses in Mississauga because she didn’t want to hurt her feelings.

Soon after, I received a call from an agent who told me she is listing her aunt’s house. She noticed I sell many homes in the area and she was inviting a few agents to view the house to see if anyone had buyers who would buy it before it goes on MLS the following week. At the same time she volunteered that the house was staged, ready to go on the market and the sellers planned a vacation to coincide with the house going on MLS.

I said “why are you soliciting offers now if the house is ready to go on MLS and the sellers made plans to go away anyway?" She responded that the sellers would prefer not to have people trekking through their house. So I asked her what the asking price was and she responded $729,000 but she hoped she could find an agent who has a buyer who would pay $780,000 and then the seller would forego putting the house on MLS. At this point I felt compelled to say “I appraised your aunt’s house three months ago for $849,000 and you will drastically undersell it if you continue with your planned course of action.”

She became defensive and rambled on about all the things wrong with the house and that, to her horror, it even needed to be waterproofed therefore it couldn’t possibly be worth $849,000. I responded “I know all this but this is not Mississauga and many old houses in the city need waterproofing.” I continued, “I reflected this in the suggested list price of $849,000 that I gave your aunt. Why don’t you market all the positives of the house like the desirable lot and room sizes, great street and proximity to all amenities instead?" I told her that if she was going to sell the house before exposing it to the market she was going to under sell it drastically. For the life of me, to this very day, I have no idea why the owner would believe her inexperienced niece who sold houses in Mississauga when I gave her an appraisal of $849,000.

I finally got through to her and she ended up listing the house on MLS and sold it for over $850,000. This is clearly an example of a naive seller who took advice from an agent who is not qualified but she was a relative and she trusted her. The seller, to this very day, is not aware of our conversation and she is lucky her niece contacted me.

Due diligence

Needless to say, I feel very strongly that the consumer should perform thorough due diligence before choosing an agent and that it’s unfair for agents to apply undue pressure on their friends or relatives to use them. I feel people should be allowed to use whomever they want without feeling that their relationship with their realtor friends or relatives will be compromised.

Whether you decide to deal with a friend or not is ultimately up to you. But, in my opinion, based on a quarter century of dealing with all kinds of agents and situations, a few minimum criteria should be in place before you even consider dealing with a friend just to avoid bad feelings.

The agent should have experience with the type of property you are buying or selling; the agent should have experience in, and knowledge of the area and should have a strong and unquestionable moral fibre. If you’re certain about these criteria and your relationship can withstand matters potentially getting complicated, then go ahead and use your friend or relative. If not, it can cost you a friendship, lots of aggravation and possibly a great deal of money.

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13 Responses to Should I hire my friend or relative as my real estate agent?

  1. Rosemary says:

    Josie brilliant !!
    I went through a similar event with my sister
    in law & the Beaches agent who sold my inlaws house in Thornhill, I being a Design consultant suggested agents in Thornhill only to be told no , they sell a ton in the Beach ! agh I was livid. of xcourse it sold to a builder who got a deal from the Declute group and I was miffed. I purposely don’t work with friends because of this ! your awesome , go girl !!
    Rosemary Stevens Burgess
    Colourqueen

    Reply
    • Josie says:

      As a policy I never take a listing in an area I am not familiar with. I have been asked to many times to list houses outside the city and I refuse. Instead, I look for the most qualified agent in that area and I refer the business. Agents who work in the city can’t possibly service clients who live in the outskirts. To give you just a few reasons why:

      1. In order to properly appraise a house, an agent has to consider the sale prices of the most recent properties and have been inside those homes in order to compare it to one they are appraising. It’s unlikely that if I were to list a house in Newmarket or Woodbridge that I would have been inside the comparable homes. Agents who list houses in areas that are outside their familiar territory use the listing sheet to determine how the house they are appraising compares to a comparable to determine a list price. How reliable is that? Many times listing descriptions are exaggerated to make them sound much better. It’s like saying a house is in Forest Hill when it’s on Bathurst Street or one that is represented as a four bedroom and in reality it’s a three with a tandem room. You get the drift – you can’t assign a list price based on the listing sheets of the comparables.

      2. When an agent has a listing, it’s critical to keep oneself abreast of all new properties on the market (your competition) and doing so when the area is far away is not possible especially in the winter.

      3. An agent has been robbed of all their negotiating power when they list in areas they are not familiar with because they have no credibilty therefore no ammunition.

      4. Maybe I’ll write a blog about this………..

      Reply
  2. Pingback: Should I hire my friend or relative as my real estate agent? | Josie … | London Ontario Real Estate Agents

  3. Alex Gore says:

    Great read. I love all your posts, thanks for the great blog. Glad I found it, keep up the good work.

    Reply
    • Josie says:

      I’m so glad you enjoy the blogs Alex.

      Reply
  4. Myrtle Luna says:

    Thanks a lot for sharing this very interesting blog. It is really hard especially since you are dealing with a friend. In most cases, people don’t hire their friend for fear of severing the relationship but it all depends on the deal or the situation.

    Reply
    • Josie says:

      You are welcome. I’m glad you enjoyed it.

      Reply
  5. Lora Julian says:

    Hiring a friend or a relative as an agent has its pros and cons. The good thing about this is that friends and relative are always so easy and approachable. The downside to this is when they ask for more and putting their own interests above yours which is what happened in a lot of cases.

    Reply
    • Josie says:

      It is a very hard decision and one that should be made with a great deal of thought and consideration of all the factors at play. Thank you for your insight.
      Josie

      Reply
  6. Carol says:

    You failed to mention the downside from the agent’s perspective. Friends can be overly demanding of their agent friends as they feel there are doing them some kind of favour. I think there is more of a danger in the agent getting mistreated than the other way around.

    Reply
    • Josie says:

      All around it is rarely a good idea to mix business with friendship. But everyone decides, seller and friend agent, what is best for them.

      Reply
  7. Debra says:

    What are your thoughts on a friend or relative (that lives in another province) pressuring you to help them get a referral fee? I’ve been asked to tell realtors in my city that I’m already working with a realtor so that he/she can get a referral fee from the home I buy.

    Reply
  8. Josie says:

    I don’t like it when a consumer is pressured in any way. I don’t think it’s a good idea if the out of town realtor has not, in fact, referred the agent. This does not benefit you at all. It only benefits the out of town realtor friend. And what has he/she done for this referral. Nothing. This falls under the “entitlement society”. People who want something for nothing.

    Reply

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